E-LESSON-7

IDOL Institute of Distance and Online Learning ENHANCE YOUR QUALIFICATION, ADVANCE YOUR CAREER.

BCA 2 All right are reserved with CU-IDOL Internet Computing and Ethics Course Code: BCA 113 Semester: First SLM Units: 7 e-Lesson No.: 6 www.cuidol.in Unit-7 (BCA113)

Electronic Payment System 33 OBJECTIVES INTRODUCTION Student will be able to define electronic payment. In this unit we are going to learn basic electronic payment. Student will be able to learn various payment Also define various payment methods used in methods used in e commerce. e commerce Student will be able to learn about E-checks E- cash etc. Student will be able to know about the risks Brief explanation list the risks involved in e- involved in e-payments. payments www.cuidol.in Unit-7 (BCAA111133)) INASlTl ITriUgThEt OarFeDrIeSsTeArNvCeEd AwNitDh OCNUL-IIDNOE LLEARNING

TOPICS TO BE COVERED 4  Introduction to Electronic Payment System  About various modes of EPS  About Risk in EPS www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

What is EPS 5  An Electronic Payment System which help the customer or user to make online payment.  Aim: To transfer money over the internet. Ex:  Online reservation  Online booking www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Types of EPS 6  Ecash  Smart Card  E wallet  Credit Card www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

DIGITAL TOKENS BASED ON E- PAYMENT 7  The digital token based payment system is a new form of electronic payment system which is based on electronic tokens rather than e-cheque or e-cash.  The electronic tokens are generated by the bank or some financial institutions.  Hence we can say that the electronic tokens are equivalent to the cash which are to be made by the bank. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Using the Digital Currency 8  Once the tokens are purchased, the e-cash software on the customer‘s PC stores digital money undersigned by a bank.  The users can spend the digital money at any shop accepting e-cash, without having to open an account there or having to transmit credit card numbers.  As soon as the customer wants to make a payment, the software collects the necessary amount from the stored tokens. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Smart Card 9  A smart card is about the size of a credit card, made of a plastic with an embedded microprocessor chip.  The microprocessor chip is loaded with the relevant information and periodically recharged including this systems have been developed to store cash onto the chip.  The money on the card is saved in an encrypted form and is protected by a password to ensure the security of the smart card solution. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Smart Card Processing 10  User open account and receive smart card.  User download tokens onto card.  User insert card in reader.  Tokens are transferred from user card to vendor.  Goods delivered.  Vendor redeems tokens. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Smart Card Processing 11 www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Advantage of Smart Card 12  Stored many types of information  Not easily duplicated  Not occupy much space  Portable  Low cost to issuers and users  Included high security www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Credit Card 13  It is a plastic card having a magnetic number and code on it.  It has some fixed amount to spend.  Customer has to repay the spend amount after sometime.  There are two types of credit cards on the market today:  Credit cards issued by credit card companies (e.g., MasterCard, Visa) and major banks (e.g. Is Bankasi, etc.) .  Credit cards issued by department stores (e.g Boyner), oil companies (e.g. Shell) www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Processing of Credit cards payment 14 www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

RISK IN EPS 15  Credit risk Unit-7 (BCA113) All right are reserved with CU-IDOL  Fraud Risk  Compliance Risk  Systemic Risk  Operational Risk  Strategic risk  Reputation Risk www.cuidol.in

Credit Risk 16  There is risk to a transaction if a party cannot provide the necessary funds for a settlement to take place.  This can occur if an originator goes bankrupt or returns come in after settlement. Weaknesses such as a lack of appropriate exposure thresholds or limits, and inadequate originator credit analysis, elevate the potential for credit risk. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Fraud Risk 17  There is the potential that a new transaction will be added to the processing stream for illicit reasons, or an existing transaction will be intentionally altered in an attempt to misdirect or misappropriate funds.  Inadequate internal controls over physical security, data security, change controls and operational controls increase the potential for fraud and possible losses to a credit union. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Compliance Risk 18  There is the possibility a credit union will fail to comply with regulatory requirements, including—but not limited to—the Electronic Funds Transfer Act, the Bank Secrecy Act, and requirements of the Office of Foreign Assets Control. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Systemic Risk 19  There is the potential one or more participants in the clearing and settlement network will be unable or unwilling to settle its commitments.  This could cause other participants to be unable to settle their commitments on one or more other payment networks. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Operational and transaction Risk 20  There is a possibility that a credit union will have inadequate or failed internal processes, people and systems.  Many financial institutions process payments across different retail and wholesale payment systems.  The industry has identified this additional complexity as “cross-channel risk.”  In cross-channel risk, fraud can take place across multiple channels or access points a member does business through, such as the branch, call center, debit card, ATM, voice response unit or mobile banking site or application. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Strategic Risk 21  There is the potential for risk when a credit union grows its payment services without adequate planning or offers new payment services without proper vendor due diligence. Reputation Risk  There is a possibility that a credit union will be unable to meet customer expectations with the delivery of retail payment services. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Some Other Risk 22  Customer's risks  – Stolen credentials or password  – Dishonest merchant  – Disputes over transaction  – Inappropriate use of transaction details  Merchant‘s risk  – Forged or copied instruments  – Disputed charges  – Insufficient funds in customer‘s account  – Unauthorized redistribution of purchased items www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

E-check 23  It is another form of electronic tokens.  In the given model shown in fig, buyers must register with third-party account server before they are able to write electronic checks.  The account server acts as a billing service. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

The advantages of E check 24  They work in the same way as traditional checks.  These are suited for clearing micropayments  They create float & availability of float which is important for commerce  Financial risk is assumed by the accounting server & may result in easier acceptance. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

E cash 25  It is a digital money product that provides a way to pay for products and services without restoring to paper or coin currency.  Online form of Ecash works for all type of internet transaction.  Offline form involved a digitally encoded card that replaced paper money.  A system that allow user to pay for goods or services by transmitting a number from one computer to another.  Like the serial number on real currency notes , the e cash number are unique.  This is issued by a bank and represents a specific sum of real money www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

E-cash Processing 26 www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Key Elements of EPS 27  Security  User Experience  Functionality  Performance  Data Integrity www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Security 28  Security is a massive cause for concern when payments become digital in nature.  Right from the need to being able to assure that personal information is not being handed over to guaranteeing that their money is in safe hands, banks need to proactively declare that their systems and processes are completely secure.  Security testing can guarantee that applications and products are suitable to be launched into the market. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

User Experience 29  Companies are taking user experience seriously, and quite a few of them are innovatively redesigning crucial interfaces.  When dealing with funds, customers often look for simplicity and convenience. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Functionality 30  As more financial transactions transfer from bank branches to mobile phones, the quality of mobile banking apps will become a point of differentiation for banks.  Quality in such a scenario is, once again, defined by the functionality of the application.  Functional testing comprises of functionality testing, which is a feature validation of an entire function or component of your product. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Performance 31  The performance of an application can either drive the customer to exhilaration or to utter madness.  In the increasing world of cashless transactions, most customers depend on their banking cards or digital application to perform transactions seamlessly. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Data Integrity 32  Banking is the most important service that runs solely on the matter of trust.  The customer is responsible for the provision of authentic information, while the banks are responsible for maintaining transparency and ensuring the safety of customers’ funds.  In such a scenario, it becomes crucial to collect information that instantly reveals a customer’s financial data and, furthermore, expenditure trends. Compromising such data can have disastrous consequence, and banking organizations must take care to never be at the receiving end of such a disaster. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Credit card vs Debit Card 33 www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Credit card vs Debit Card 34 Application Process Somewhat difficult, depending on Easy, with basically no barrier to one's credit score and other receiving a debit card. details. Spending Limit The credit limit set by the credit However much is in the bank issuer. Limits increase or stay the account connected to the card. same over time as a borrower's creditworthiness changes. Interest Charged If a credit card bill is not paid in No interest is charged because no full, interest is charged on money is borrowed. outstanding balance. The interest rate is usually very high. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Credit card vs Debit Card 35 Security Credit cards in the U.S. are not A PIN makes them secure so long very secure in and of themselves as no one steals the card number because many still use dated and PIN, and as long as you don't card security technology. lose the card itself. If the However, consumers are not card/info is stolen, debit cards held liable for this poor security. are very insecure. Fraud Liability Low. Rarely held liable for High. If someone steals your card fraudulent activity. If you are, you and makes purchases, that are only held liable for a money is removed from your maximum of $50. bank account. Investigating this damage takes time. The longer you wait to report the fraud, the more likely you will be held liable for your own losses. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

Credit card vs Debit Card 36 Credit History Responsible credit card usage Does not affect credit history. and payment can improve one's credit rating. Credit cards typically report account activity to at least one of the three major credit bureaus on a monthly basis. Overdraw Fees Low. Some credit card companies High \"overdraft\" fees. Possible to allow to overdraw amount over overdraw amount over the the maximum credit line with a account limit. fee. PIN In the U.S., this is uncommon, Usually but PINs are being phased in. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

MULTIPLE CHOICE QUESTIONS 37 Q1. Which of the following is the type of EPS? a) Credit card b) E cash c) E check d) all of these Q2.The most prevalent online payment method is ? a) Paypal b) Checks c) credit cards d) debit Q3.E- Cheques are - a) Prepaid b) Postpaid c) Both prepaid and postpaid d) None of these Answers: 1. d) 2. c) 3.a) www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

MULTIPLE CHOICE QUESTIONS 38 Q.4 What is e-payment? a) Electronic payment for buying and selling through the Internet b) Payment of online software c) Payment of online services d) Payments of product Q5. What is the main driver of electronic payment growth? a) Consumer demand for new methods b) Government regulation c) Technology Development d) online shopping Q.6 What are the main concerns about electronic payment? a) Privacy and security b) Privacy and charged fees c) Security and charged fees d) Charged fee Answers: 4. a) 5. c) 6.a) www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

SUMMARY 39  An Electronic Payment System which help the customer or user to make online payment.  Ecash, Smart Card, E wallet, Credit Card are the types of EPS.  The digital token based payment system is a new form of electronic payment system which is based on electronic tokens rather than e-cheque or e-cash.  A smart card is about the size of a credit card, made of a plastic with an embedded microprocessor chip.  Credit Card is a plastic card having a magnetic number and code on it.It has some fixed amount to spend. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

SUMMARY 40  E-cash is a digital money product that provides a way to pay for products and services without restoring to paper or coin currency.  E-check is another form of electronic tokens.  Credit risk, Fraud Risk, Compliance Risk, Systemic Risk, Operational Risk, Strategic risk, Reputation Risk are some risk in EPS. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

FREQUENTLY ASKED QUESTIONS 41 Q1. What is meant by electronic payment system (EPS)? Explain any four types of EPS. Ans: An Electronic Payment System which help the customer or user to make online payment. For Further details please refer to the subject SLM unit 7. Q2. List and explain risks in electronic payment system. Ans: Risk includes - Credit risk, Fraud Risk, Compliance Risk, Systemic Risk, Operational Risk, Strategic risk, Reputation Risk. For Further details please refer to the subject SLM unit 7. Q3. Differentiate between debit card and credit card. Ans: In credit card, customer has to repay the spend amount after sometime. Whereas using debit card you can spend money if you have some balance in your account. For Further details please refer to the subject SLM unit 7. www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

REFERENCES 42  https://www.business2community.com/ecommerce/e-payment-system-01641721  https://www.tutorialspoint.com/e_commerce/e_commerce_payment_systems.htm www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL

43 THANK YOU www.cuidol.in Unit-7 (BCA113) All right are reserved with CU-IDOL